Microeconomics: An Islamic Approach

At the heart of modern economic theory is the micro-economic model of homo economicus, who is cold, calculating and callous. This picture of humans as heartless rational robots is what leads to “Poisoning the Well: How Economic Theory damages our moral imagination” (Julie Nelson). I have provided a thorough critique of neoclassical utility theory in my paper: The Empirical Evidence Against Neoclassical Utility Theory: A Review of the Literature,” International Journal of Pluralism and Economics Education, Vol. 3, No. 4, 2012, pp. 366-414. However, as Thomas Kuhn noted, paradigms cannot be changed by critiques; they can only be changed by providing an alternative paradigm. Thus to oppose neoclassical utility theory, we need an alternative model for human behavior. For western theorists, a natural alternative is the secular humanist model, which allows for a wide range of cognitive and emotive functions not captured in economics. For my purposes, Islam provide a more relevant model of human beings as having spiritual, emotional and rational dimensions. This model speaks directly to my audience. (see also “Spirituality and Development“)

It is also true that, regardless of how we try, it is impossible to do economics without notions of morality, justice, equity and fair-play. Currently economics pretends to be positive, which means that it sneaks in very questionable (indeed, poisonous) value judgments (like that of Gauthier) into the framework, without explicit discussion. I have explained how the apparently objective concept of scarcity is actually built upon hidden foundations of three major value judgments about exogeneity of tastes, sacredness of property rights, and the idea that (unobservable) human welfare directly corresponds to (observable) human choice behavior:; see the normative foundations of scarcity, real-world economics review, Issue no. 61, pp.22-39. Again to oppose neoclassical micro, we must introduce an alternative ethical and moral framework. Here again it suits my purpose to use an Islamic framework for this purpose.

Below, I provide a link to a summary of the first lecture I gave, in a unique course on Microeconomics. Unlike Western epistemology which takes all knowledge as useful, Islam differentiates between useful and harmful knowledge. I am teaching my students that conventional micro is “Harmful” knowledge, which damages our natural tendencies for compassion and kindness, and teaches us to be selfish. It teaches us to accept poverty, misery, injustice, and exploitation as natural outcomes of an ideal economic system. The link below provides (1) a very brief summary of the lecture, (2) a link to the 91min video of the actual lecture, and (3) a more detailed 2500 word outline of the lecture, for people who don’t have time to watch/listen to the 90 minute lecture.

2 responses

We need a comprehensive comparative religion approach so the various major faith traditions can begin to speak with one voice together.

“Mechanical inventions and the dissemination of knowledge are modifying civilization; certain economic adjustments and social changes are imperative if cultural disaster is to be avoided. This new and oncoming social order will not settle down complacently for a millennium. The human race must become reconciled to a procession of changes, adjustments, and readjustments. Mankind is on the march toward a new and unrevealed planetary destiny.

“Religion must become a forceful influence for moral stability and spiritual progression functioning dynamically in the midst of these ever-changing conditions and never-ending economic adjustments.

“[S]ociety can never hope to settle down as in past ages. The social ship has steamed out of the sheltered bays of established tradition and has begun its cruise upon the high seas of evolutionary destiny; and the soul of man, as never before in the world’s history, needs carefully to scrutinize its charts of morality and painstakingly to observe the compass of religious guidance. The paramount mission of religion as a social influence is to stabilize the ideals of mankind during these dangerous times of transition from one phase of civilization to another, from one level of culture to another.

“Religion has no new duties to perform, but it is urgently called upon to function as a wise guide and experienced counselor in all of these new and rapidly changing human situations. Society is becoming more mechanical, more compact, more complex, and more critically interdependent. Religion must function to prevent these new and intimate interassociations from becoming mutually retrogressive or even destructive. Religion must act as the cosmic salt which prevents the ferments of progression from destroying the cultural savor of civilization. These new social relations and economic upheavals can result in lasting brotherhood only by the ministry of religion.

“A godless humanitarianism is, humanly speaking, a noble gesture, but true religion is the only power which can lastingly increase the responsiveness of one social group to the needs and sufferings of other groups. In the past, institutional religion could remain passive while the upper strata of society turned a deaf ear to the sufferings and oppression of the helpless lower strata, but in modern times these lower social orders are no longer so abjectly ignorant nor so politically helpless.

“Religion must not become organically involved in the secular work of social reconstruction and economic reorganization. But it must actively keep pace with all these advances in civilization by making clear-cut and vigorous restatements of its moral mandates and spiritual precepts, its progressive philosophy of human living and transcendent survival. The spirit of religion is eternal, but the form of its expression must be restated every time the dictionary of human language is revised.” (Urantia Book 99:1)